Market Synopsis: Equities up, Treasury Yields down, Commodities mixed, Dollar down, Crypto up
Past Week Events:
This week on Wednesday the FOMC minutes were released. The FOMC or Federal Open Market Comittee makes important decisions regarding monetary policy. The minutes help give investors a sense of what the Federal Reserve is planning for markets. Unfortunately, for investors most Fedreal Reserve officials took a hawkish tone explaining that interest rate cuts are most likely not appropriate this year.
The Institute for Supply Management or the ISM provided important insight into the health of the economy. This friday the report illustrated a slow in the economy and as a result investors breathed a sigh of relief as rate hike expectations eased.
This Friday the Unemployment report also detailed some important information regarding the economy. The report demonstrated a slow in wage growth which also was a very good sign for investors as the Federal Reserve may reign in its aggressive monetary policies.
CPI serves as a measure of inflation, measuring price changes in consumer goods and services. As inflation has been slowly cooling as of late, this will be an important indication into where the trend is going.
NFIB Small Business Optimism Index will be released which basically releases how small businesses are doing on an overall market trend.
Market Snapshot:
Markets started the week off with a rocky start. The release of the FOMC minutes was an important catalyst for the week sending markets lower. The hawkish rhetoric present made investors weary. Federal Reserve officials made it very clear that investors should not be hoping for rate cuts anytime soon. Markets tumbled but on Friday two other major catalyst flipped sentiment sending stocks and bonds higher. ISM report and the unemployment report demonstrated that the Federal Reserve’s monetary policy is working and that inflation may be cooling. This was an optimistic note investors needed. As a result the S&P closed up almost 2% on the week.
U.S Equities:
Indexes(Week)
SPX 3,895.08(1.45%), DJIA 33,630.61(1.46%),
NASDAQ 10,569.29(0.98%), RUT 1,792.80(1.79%)
Sectors
The majority of sectors closed in the green on the week. Communications was the clear winner of the week outpacing all other sectors closing out the weeky almost at a 5% return. Health care, utilies, and tech were the losers of the week as they were negative albeit slightly.
Bonds followed the performance of stocks very similarly this week. Bonds got hit with the hawkish sentiment in the FOMC minutes but recovered greatly with the cool ISM numbers and Unemployment data.
Oil tanked as the new year began touching 73$ a barrel. Oil tried to recover but ultimately fell back down to about 73$ a barrel.
Gold unlike Oil has had an excellent start to the year up 2.5 percent. Gold rallied to $1875 an ounce.
BTC -16,576, -1.42% ETH - 1,197.52, -1.99%
Bitcoin closed the week down. 2023 will be an interesting year of crypto as it struggles to recover from many massive blows it has taken this year.
Europe:
Stoxx 600- 444.42, 4.60% DAX -14,610, 4.93% FTSE 100 -7,699, 3.32%
Chart of the DAX (5-day)
Europe’s markets were clearly content this week highlighted by an almost 5% increase in the DAX. This was followed by EuroZone inflation data that indicates a decrease in inflation for the second month in a row. The European Central Bank has been hawkish (aggressive) in tightening monetary policy in order to cool inflation, so the decrease may foreshadow good things to come.
Asia:
XJO (Australia)-7,109, 1.01% Shanghai 180 Index-8,449, 2.68% Nikkei 225- 25,973, -0.46%
XJO 5-day Chart
Japan’s economic output has finally shown signs of success for the first time in three years. The output gap is defined by the difference between the economies’ actual output versus its potential output. Since covid, there has been very negative output gaps in Japan, but for the first time since, its gap has narrowed all the way to almost nothing. The yen and the Bank of Japan had a rough 2022, but the rejuvenated output gap may show signs of a positive future.
Sources Cited
“Live Stock, Index, Futures, Forex and Bitcoin Charts on TradingView.” TradingView, www.tradingview.com/chart/.
“U.S. Economic Calendar.” MarketWatch, www.marketwatch.com/economy-politics/calendar.
Smith, Elliot. “European Markets Clock Best Week since November as Investors Digest U.S. Jobs Report.” CNBC, CNBC, 6 Jan. 2023, www.cnbc.com/2023/01/06/europe-markets-open-to-close-key-euro-zone-inflation-data-in-focus.html.
Person, and Leika Kihara. “Japan's Output Gap Closes in Positive Sign for Economy, BOJ.” Reuters, Thomson Reuters, 6 Jan. 2023, www.reuters.com/markets/asia/japans-output-gap-closes-positive-sign-economy-boj-2023-01-06/.
“Wall Street Notches Best Day in 10 Years in Holiday Rebound - the Garden Island.” The Garden Island, 26 Dec. 2018, www.thegardenisland.com/2018/12/26/news/wall-street-notches-best-day-in-10-years-in-holiday-rebound.Robb, Greg. “No Fed Official Expects an Interest-rate Cut to Be Appropriate This Year, Meeting Minutes Show.” MarketWatch, www.marketwatch.com/story/no-fed-official-expects-interest-rate-cuts-will-be-appropriate-this-year-minutes-show-11672859007. Accessed 6 Jan. 2023.Reuters. “U.S. Service Sector Contracts in December, Price Increases Slow, ISM Survey Says.” Reuters, 6 Jan. 2023, www.reuters.com/markets/us/us-service-sector-contracts-december-price-increases-slow-ism-survey-2023-01-06.Bartash, Jeffry. “First Negative ISM Reading Since Early Pandemic Is More Proof U.S. Economy Is Slowing.” MarketWatch, www.marketwatch.com/story/first-negative-ism-reading-since-early-pandemic-offers-more-evidence-economy-is-slowing-11673018500. Accessed 6 Jan. 2023.Bartash, Jeffry. “U.S. Adds Robust 223,000 Jobs in December. Wage Growth Slows in Sign of Ebbing Inflation Pressures.” MarketWatch, www.marketwatch.com/story/u-s-adds-223-000-jobs-in-december-and-jobless-rate-matches-55-year-low-of-3-5-11673012538. Accessed 6 Jan. 2023.
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